Recession: How FG can diversify economy- MAN

The Manufacturers Association of Nigeria (MAN) has advised the Federal Government to reposition the manufacturing sector to improve on the current economic situation.

MAN President, Mr Frank Jacobs, gave the advice in an interview with the News Agency of Nigeria (NAN) in Abuja on Sunday.

President Muhammadu Buhari and Vice President Yemi Osinbajo at the opening of a 2-day National Economic Council Retreat at the Statehouse Conference Centre on 21st March 2016.

Jacobs was reacting to the recent statistics on inflation released by the National Bureau of Statistics (NBS) that put the rate of inflation in the country at 17.1 percent in July.

“An inflation rate of 17.1 percent, as reported by the National Bureau of Statistics, is severely harmful to the economy.

“It is significantly responsible for the rolling contraction in Nigeria’s output since the first quarter of 2016 when the economy grew by -0.36 per cent and in the second quarter by -2.06 per cent.

“Over the period mentioned above, the cost of raw materials and manufacturing inputs had risen while capacity utilisation declined.

According to him, working capital in the sector has increased beyond the norm.

Jacobs said the aggregate consumption of household goods had fallen due to high inflation that had reduced significantly the real family income.

The president said issues like: unemployment, wealth creation and internally generated revenue would be tackled if government could reposition the industrial/manufacturing sector through viable policies.

“The diversification of the economy cannot be truly achieved if the manufacturing sector is neglected.’’

He urged government to implement its resource-based industrialisation and backward integration policies in developing key mineral resources.

Jacobs said this should include those with high inter-industry linkage such as: iron ore, zinc-led, bitumen, limestone and coal.

He said policies geared toward backward integration in the agricultural sector would serve as catalyst to the provision of food for Nigerians and industrial input for the manufacturing sector.

He explained that the deregulation of the downstream petroleum sector should be pursued vigorously to encourage private investment in domestic refining and petrochemical industry.

Jacobs said the current special foreign exchange window created by the Central Bank of Nigeria (CBN) for importation of industrial raw-materials and machinery should be well managed and transparently too.

“At this period that the economy has gone into full recession, government must address the real issues that led to the inflation and adopt economic policies that will mitigate the situation.

“For instance, in the short term, funds should be made available to the manufacturing sector at five per cent interest rate.

“Also, the 41 items of raw materials that were excluded from the foreign exchange market by the CBN should be reviewed, especially, now that the country operates a flexible foreign exchange regime.’’

He advocated adequate and sound support infrastructure that would encourage more domestic production in terms of volume of output and cost effectiveness.

“Government can address the infrastructure gap by domiciling gas price in naira for manufacturing industries as against the current dollarization so as to boost electricity self-generation by industries.’’

He said the government should take a second look at the electricity privitasation as the current operators seemed to be confused and lacked the capacity to achieve the desired results.

“The infrastructure gap can be addressed by encouraging strong Public Private Partnership (PPP) in rail transportation and rehabilitation of existing roads and construction of new ones that would open up the country in terms of movement of goods.

“If these issues are sufficiently addressed, domestic commodity production will be boosted and this would lead to increased foreign commodity substitution.

“The result will be a gradual receding of inflation rate from the current 17.1 per cent to a desired level where the economy will be stable,’’ Jacobs said. (NAN)